St George Economics economy and finance update

Share Markets:

Sentiment was bolstered by better than expected US economic data and a successful bond auction in Italy.

Federal Reserve Chairman Bernanke also hosed down concerns of an early withdrawal of stimulus.

The Dow rose 1.3%, while the S&P500 rose 1.3% and the Nasdaq was 1.0% higher. 
 

Bonds:

US treasuries fell (yields rose) following comments from Fed Chairman Bernanke defending the asset purchase program, which would help support growth.

Italy successfully sold €6.5bn worth of bonds at the first auction since the election.

In the secondary market, relief that the auction went relatively well saw yields fall from four-month highs.

Ten-year yields fell 9 basis points.
 

Foreign Exchange:

The US dollar index fell as risk appetite improved and after Bernanke hinted that the Fed would continue its quantitative easing program for some time.

The euro rallied on relief that Italy successfully sold bonds after the election.

The Australian dollar dipped to below 1.02 overnight, but recovered following Bernanke's comments to be little changed.
 

Commodities: Commodity prices were mixed.

Gold prices fell despite Bernanke's defence of the Fed's quantitative easing program.

Oil prices were little changed, while copper prices gained.
 

Australia:

Construction work done was softer than expected, falling 0.1% in Q4.

This followed solid gains over the past three years, with construction work up 11.9% in the year to the December quarter.

Engineering construction drove the decline in Q4, falling 1.3%.

However, an increase in building construction was a bright spot in the report.

Residential construction rose for the second consecutive quarter. 
 

Europe:

There is speculation Bersani will form an alliance with Berlusconi to avoid a second election, which would risk the comedian Beppe Grillo from winning more than the 25% of the popular vote he achieved over the weekend.

Such an alliance would be questionable given the very opposing views on austerity and economic reform.

Euro zone economic confidence rose from 89.5 to 91.1 in February, its highest in nine months.

Resurfacing concerns from Italy, however suggests the boost to confidence will unlikely last.

The business climate index rose from -1.09 to -0.73, the fifth consecutive month without falling.

The GfK reported a slight rise from 5.8 to 5.9 in their March consumer confidence report for Germany.

Euro zone M3 money supply annual growth edged up from 3.4% to 3.5% in January, but credit to the private sector decelerated from an annual pace of -0.7% to -0.9% in the year to January.
 

Japan: 

Retail trade was stronger than expected, rising 2.3% in January, following an unchanged result in December.

For the year to January, retail sales are down 1.1%, although this too beat consensus expectations.
 

New Zealand:

The trade balanced moved into deficit in January, with a deficit of NZ$305mn, from a surplus of NZ$534mn in December.

Exports fell 18.4% to a four-month low, while imports edged up 2.4% in January.
 

United Kingdom: 

UK GDP growth was revised up from 0.0% to 0.2% in 2012, although the Q4 contraction of 0.3% was unrevised.

Exports and capital expenditure were behind the quarterly decline, despite private and government spending growth.
 

United States: 

US durable goods orders fell 5.2% in January, mainly due to a sharp fall in aircraft orders (civilian aircraft fell 34%).

Defence orders were down 70% following a 107% jump in January, and auto orders were about flat for the second month running.

The bright spot in the report was the 6.3% jump in core capital goods orders, which have risen about 12% since the start of the fourth quarter.

However this strength is taking time to show up in shipments of core durables which fell 1.0% in Jan and were flat in December.

US pending home sales rose 4.5% in January and the December's result was revised from -4.3% to -1.9%.

Sales are up 10.4% in the year to January.

 

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